Five Ways to Compete Against Low-Price Competitors

All of us, at one time or another, are confronted with a low-cost or low-price competitor. But if you believe the low-cost competitor will eventually enter the segment you serve, now is the time to prepare for when this competitor and you are attempting to win the same segment. Differentiate Differentiation is your first line of defense. Customer-centric marketing requires placing the customer at the center of your marketing strategy in an effort to create and extract customer value. Rather than lowering the price on your product, which may be better than the competitor's but more than what the customer needs, you may need to develop a specific product that will compete head-on with the competitor's product that you can provide at a lower price point. This strategy will be successful only if you will become more competitive as a result of having set up the low-cost subsidiary. A successful low-cost-subsidiary strategy requires that the low-cost subsidiary use a separately recognizable brand name, with a limited product offering, intend for the sole purpose of competing with the low-cost competitor. Do not include all the services and accommodations that the parent company can offer. If you take this approach, you must launch a subsidiary with the idea that it is a real business that must make a profit. In short, if you decide to take this approach, the subsidiary should actually be able to compete in the market with its parent as well as the other suppliers in the market.

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All of us, at one time or another, are confronted with a low-cost or low-price competitor. The solution isn’t to lower your prices and engage in a price war, because the result is lowered profitability for everyone involved.

So, what can you do to compete?

Before you decide on your strategy, you need to do some research, which should begin with both an objective analysis of where you stand in relation to your competition and an analysis of market needs and preferences.

Use the results of your research to determine what segments you serve and which ones the low-cost competitor serves, to better understand whether you are serving the same segment of the market or different ones.

If you are truly serving different parts of the market, then stay the course. But if you believe the low-cost competitor will eventually enter the segment you serve, now is the time to prepare for when this competitor and you are attempting to win the same segment.

The Best Defense Is a Good Offense

In 1799, George Washington wrote that “offensive operations, often times, [are] the surest, if not the only (in some cases) means of defence.” That approach has been applied to various competitive theaters, including business.

The following five tactics will help make sure you’ll have a fighting chance against competitors.

1. Differentiate

Differentiation is your first line of defense. It is fundamental to long-term success. Differentiation is defined as finding a significant point of difference that facilitates a sustainable competitive advantage. It is at the heart and soul of your positioning.

2. Be customer-centric

Clearly understand exactly what your customers want and what they will pay for. Focus your efforts on excelling in those areas of demand. Customer-centric marketing requires placing the customer at the center of your marketing strategy in an effort to create and extract customer value. It is the essence of enabling Marketing to serve as a value creator. Don’t guess. Ask. Invest in voice-of-customer research, win/loss analysis, and customer advisory boards.

3. Price based on value

Value-based pricing is based on understanding the overall value of an offering to any one buyer. Establish a solid pricing process that will enable you to differentiate your pricing across distinct market segments. Understand how…

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